Proposed revisions to the Money Laundering and Terrorist Financing Control (MLTFC) Regulations could compel individuals carrying R25 000 or more in cash or bearer negotiable instruments across South Africa’s borders to report this to the Financial Intelligence Centre (FIC).
On 8 April, Finance Minister Enoch Godongwana invited written submissions on the draft amendments to the Money Laundering and Terrorist Financing Control Regulations. This invitation is contained in Notice 4712 published in Government Gazette No. 50450.
According to National Treasury’s Explanatory Memorandum, because moving cash or bearer negotiable instruments across borders can create opportunities for money laundering and terrorist financing, it is important for countries to have systems to track these transfers.
The proposed amendments are part of a process to bring section 30 of the Financial Intelligence Centre Act (FICA) into operation. The objective of section 30 is to ensure that information relating to the cross-border movement of cash and bearer negotiable instruments is made available to the FIC.
The FIC currently receives reports on cross-border electronic funds transfers (section 31 of FICA). In addition, the FIC receives reports on large cash transactions (section 28), suspicious or unusual transactions (section 29), and property linked to persons or entities that are subject to targeted financial sanctions (section 28A).
The proposed draft amendments are aimed at strengthening the country’s financial system and improve its resilience against abuse by money launderers and terrorist financiers. It is critical to the effectiveness of the FIC’s operational capabilities that the information it receives concerning cross-border financial flows are expanded to include cross-border movement of cash and bearer negotiable instruments. This is envisaged to strengthen the FIC’s ability to detect possible suspicious or unusual activity and disseminate the relevant information to investigating and prosecuting authorities, National Treasury said in a statement.
Section 30 of FICA empowers the Minister of Finance to prescribe, through regulations, a threshold amount that will trigger reporting under this section. The minister proposes that the threshold for reporting under section 30 be set at R24 999.99. This means that persons who convey R25 000 or more into or out of the Republic will be required to report this under section 30.
Threshold amount – what constitutes cash?
The report mandated by section 30 will be called the Cash Conveyance Report (CCR).
“Cash” is defined in FICA to include coin and paper money of the Republic or of any other country, as well as travellers’ cheques. In other words, the conveyance of the cash is reportable regardless of the currency in which the amount is held.
The requirement also covers moving bearer negotiable instruments across borders if their total value surpasses the prescribed threshold.
National Treasury describes a bearer negotiable instrument as “an instrument that is not legal tender, but which can be exchanged upon its presentation for an amount of money that is specified in the instrument, and which entitles the holder of the instrument to the funds it represents”. Examples of these instruments are bills of exchange, letters of credit, money orders, postal orders, and promissory notes.
The responsibility for reporting the transportation of cash or bearer negotiable instruments falls on the person who carries them, including where they are acting on someone else’s instruction or behalf.
Information that must be included in the CCR
Section 30 also empowers the minister to prescribe the information that must be included in a report on the conveyance of cash or bearer negotiable instruments. This information must be sufficient to provide the FIC with the necessary transparency and traceability information concerning the cross-border movements of cash and bearer negotiable instruments.
Customs officers designated by the South African Revenue Service (SARS) under the Customs and Excise Act will have the authority to request reports about the transport of cash or bearer negotiable instruments from people entering or exiting South Africa.
As the draft amendments stand now, the details required to be reported under section 30 must give the FIC enough information to track and understand the movement of cash or bearer negotiable instruments. This means providing info about everyone involved in the transaction, dates, currencies, where the money is coming from and going to, how it was acquired, and its intended use.
SARS has introduced an online declaration system for submitting CCRs. Alongside this digital platform, individuals will also be able to submit CCRs through the manual declaration process, similar to declaring goods when travelling.
CCRs will need to be completed before or upon entering or leaving South Africa. This means travellers using the online declaration system need to submit their information before crossing the border.
Those who did not use the online system will have to approach a customs official at a border crossing to make a CCR through the manual declaration process before crossing the border.
Consequences of non-compliance
Those who fail to comply will not only run the risk of having their money seized; they could also be slapped with heavy fines or even end up facing jail time.
Once section 30 of FICA kicks in, section 54 will also take effect, making it an offence not to submit a CCR. Section 68 of FICA provides that a person who is convicted of such offence is liable to imprisonment for a period not exceeding 15 years or to a fine not exceeding R100 million.
In addition, section 70 will take effect alongside sections 30 and 54. Section 70 allows for the seizure and eventual forfeiture of the cash or bearer negotiable instruments if someone violates section 30.
Last, regulation 29 of the MLTFC Regulations will also be amended to reflect that a failure to provide the prescribed information to be contained in a CCR in accordance with the new proposed regulation 23G (of the Income Tax Act) will amount to an offence.
This offence could result in a maximum of three years in prison or a fine of up to R1m.
Written submissions may be submitted to Commentdraftlegislation@treasury.gov.za not later than 19 April.
Thank you for the good laugh about money laundering cash across the borders. The very people who put these laws in place are the ones who ignore them the most! They only target the “low hanging fruit” to make it look like they are trying to do something. We are a disgustingly corrupt country at the highest levels.